Reviving Air India

Ailing Air India’s presentation to the Committee of Secretaries (CoS) speaks volumes of the plight of the national carrier. Thanks to the economic slowdown, the recession in the airlines sector, and the government inaction owing to the general election, Air India’s woes have multiplied. It has finally sought a massive Rs.20,000 crore bail out package from the Centre over a five-year period. For its immediate survival, it needs a capital infusion of about Rs. 2,500-3,000 crore, in addition to a loan of Rs.10,000 crore to tide over the crisis. Salaries to staff and employees have been held over or delayed and fuel bills have not been paid to the oil companies. But the core problems are still not addressed. Now that the National Aviation Company of India (NACIL) — born out of the merger of Air India and Indian Airlines — has formally sought assistance, the CoS, headed by the Cabinet Secretary, has driven home the message that “aggressive” cost reduction and “better” revenue management are imperative. After all, the government and the public should not be made to pay for the incompetence or inefficiency of the national carrier. A cost auditor is to be appointed by the airline to “monitor, review, and ensure” that the cost reduction and operational efficiency plans are implemented.

Providing an equity infusion of Rs.2,500 crore, or offering a loan of Rs.10,000 crore may not be an intractable problem. But the Finance Ministry, which will be the nodal agency to formulate the Air India relief package, has to take on the responsibility of ensuring that every rupee is properly spent and the airline does not come back for more all too soon. Given the downturn in the aviation sector and the fact that the merged airline has placed orders for 111 new aircraft to be delivered by 2012, pumping enough equity till then to enable it to borrow adequate amounts becomes inevitable. But the bottom line must be clear — Air India must shed its flab, cut down overhead expenses, stop freebies to the influential, pull out of uneconomic routes where possible, and function efficiently as a commercial enterprise, and not as an extension of the government. The government spends Rs.2,000 crore annually on official air travel and could as a reflex action insist that all government officials travel only by Air India even at the risk of being unfair to other airlines. There should be no bureaucratic interference in the day-to-day operation of the airline. A new board of independent directors must be appointed to steer the ‘Maharaja’ through the turbulent skies. The airline crew, staff, and the trade unions must cooperate in this difficult exercise.